Andersons Inc (ANDE) 2024 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to The Andersons 2024 first-quarter earnings conference call. My name is Rocco, and I will be your coordinator for today. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.

I will now hand the presentation to your host for today, Mr. Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please proceed.

Thanks, Rocco. Good morning, everyone. And thank you for joining us for The Andersons first-quarter earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation from our webcast, the slides and commentary will be in sync. This webcast is being recorded. And the recording and the supporting slides will be made available on the Investors page of our website at andersonsinc.com shortly.

Please direct your attention to the disclosure statement on slide 2 as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors which are described in the company's reports on file with the SEC. We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of the GAAP to non-GAAP measures are included within the appendix of this presentation.

On the call with me today are Pat Bowe, President and Chief Executive Officer; Brian Valentine, Executive Vice President and Chief Financial Officer; and Bill Kruger, Chief Operating Officer. After our prepared remarks, we will be happy to take your questions.

I will now turn the call over to Pat.

Thank you, Mike. And good morning, everyone. Thank you for joining our call this morning to discuss our first quarter results and outlook for the remainder of 2024. First-quarter results were solid for the company and overall, very comparable to last year. The mix of our results is a bit different with trade down against last year's record first quarter in renewables and nutrient and industrial, both generating favorable results against 2023. I want to thank our teams for their hard work in producing these results in transitioning markets with a continuing focus on operating safety.

As expected, trade had a slower start to the year as farmers have been reluctant to engage in forward sales at these lower price levels. Coupled with this is softer global demand for US crops as worldwide supply and demand has become more balanced. These factors impacted both our physical grain assets and our merchandising teams. Our premium food and pet food ingredients business saw significant year-over-year improvement. This is a smaller but growing portion of our trade business and improvement comes from both organic growth and two recent accretive acquisitions.

Operating performance in the renewables business was very strong and driven primarily from our ethanol plants. We had record first-quarter production and efficient operations, benefiting from lower natural gas prices and solid ethanol yields. The ethanol crush hedges the team executed during the fourth quarter also helped our ethanol margins. We are successful in increasing volume in our renewable diesel feedstock merchandising business, but have been challenged by compressed margins on industry fundamentals. Our feed co-product values were also weaker with the overall lower commodity price environment. In our nutrient and industrial business, we experienced an increased margin and volume in our agricultural fertilizer product lines in the seasonally slow quarter. Results were significantly improved from the first quarter of 2023.

Brian will now cover some of the key financial data. After that, we'll be back to discuss our outlook for the remainder of 2024. Brian?

Thanks, Pat. Good morning, everyone. We're now turning to our first-quarter results on slide number 5. In the first quarter of 2024, the company reported net income attributable to the Andersons of $6 million or $0.16 per diluted share. This compares to a net loss of $15 million or $0.44 per diluted share and adjusted net income of $7 million or $0.2 per diluted share in the first quarter of 2023. Adjusted pretax earnings were $7 million for the quarter, which was comparable to the $8 million in 2023 with renewables and nutrient and industrial both showing improvement, offset by a year-over-year decline in trade.

Adjusted EBITDA for the first quarter was $51 million compared to adjusted EBITDA of $55 million in the first quarter of 2023. Trailing 12 months adjusted EBITDA totaled $401 million. Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to noncontrolling interests. We recorded taxes for the quarter at a 9% effective tax rate. We now expect a full year adjusted effective tax rate between 18% and 22%.

Next, we'll move to slide 6 to discuss cash, liquidity, and debt. We generated cash flows from operations before changes in working capital of $48 million in the first quarter of 2024, demonstrating our ability to consistently generate strong operating cash flows in changing markets. Our cash flow generation combined with lower commodity prices and delayed farmer engagement resulted in negligible short term borrowings at the end of the quarter.

And next, we'll take a look at capital spending and long-term debt on slide 7. We continue to take a disciplined, responsible approach to capital spending and investments, which we expect will be approximately $150 million to $175 million for the year, roughly half of which is typically related to maintenance capital. Our long-term debt to EBITDA is currently less than 1.5 times, which is well below our stated target of less than 2.5 times. We have a balance sheet with significant capacity to support growth investments that meet our strategic and financial criteria. We continue to evaluate growth projects in our pipeline including additional M&A opportunities. Our project pipeline has been increasingly active over the past few months. And we are excited about potential opportunities to execute on additional growth projects, including the recently announced acquisition of Reed and prime, a bolt-on acquisition, expanding our geographic reach in our turf business.

Now we'll move on to review of each of our businesses beginning with trade on slide 8. Trade reported first quarter pretax income of $6 million and adjusted pretax income of $9 million compared to $24 million in the same period of 2023. We had mixed operating results in our trade business portfolio when compared to our record 2023 first quarter. As Pat mentioned, aggregate results of our merchandising businesses were solid, but down in a backdrop of a less dynamic US grain market with lower commodity prices and less volatility. In addition given recent geopolitical unrest, we have intentionally and prudently pulled back on activity in certain regions.

The financial results for our grain assets were relatively consistent year over year, as domestic producers are still hesitant to sell -- to forward sell due to lower commodity prices combined with limited basis appreciation to start the year. Our assets are well positioned once the grains are brought to market. Investments in growth projects including acquisitions and additional food corn capacity led to improved results in our premium food and pet food ingredients businesses. Trades adjusted EBITDA for the quarter was $24 million compared to $44 million in the first quarter of 2023.

Moving to slide 9. Renewables had a very strong first-quarter generating pretax income attributable to the company of $16 million and $13 million on an adjusted basis compared to $6 million in the first quarter of 2023. Our current quarter earnings doubled year over year due to stronger ethanol margins and favorable ethanol crush margin hedges executed during the fourth quarter. Production facilities continued to operate efficiently with record first quarter production and lower natural gas prices. Renewable diesel feedstock volumes continued to grow, but we are seeing margin compression on industry fundamentals. Feed ingredient demand is also strong, but at a lower value as it is tied to the price of corn. Renewables had EBITDA of $35 million and adjusted EBITDA of $32 million in the first quarter compared to $22 million in the first quarter of last year.

Turning to slide 10. The nutrient and industrial business reported a first quarter pretax loss of $2 million compared to a loss of $10 million in 2023. Overall, fertilizer prices stabilized in the seasonally slow quarter. The improvement year over year was driven by increased volumes and margins in core agricultural product lines. Nutrient and industrial had EBITDA of $7 million for the quarter compared to an EBITDA loss of $1 million in the first quarter of 2023.

And with that, I'll turn things back over to Pat for some comments about our outlook for the remainder of 2024.

Thanks, Brian. We remain positive about our 2024 outlook against the changing market environment. While the last few years brought us volatile demand driven markets, a global balance of supply and demand will now allow us to demonstrate our ability to deliver good results in carry markets with more focus on the value of our grain assets. We continue to expect a sizable US harvest, but acknowledge pockets of weather-related planting and fertilizer application delays due to wet weather, which is typical in this spring season. Our trade business outlook remains solid, although strong levels of global supply and reduce prices have caused both farmers and end users to reduce their forward contracts.

Markets have recently begun to move higher, which could bring more volatility into the mix. At this time, we continue to expect a normal growing season. In February, we talked about our lowered expectations for wheat storage income with the large purchases from China during the fourth quarter.

Subsequent cancellations of a significant portion of that weak purchases from China has resulted in a return of carry to the wheat markets leading to a more positive outlook. We're also very pleased with the growth in our premium food and feed ingredient products and look for that to continue to both grow organically and through acquisitions.

Our renewables segment looks to build on their outstanding first quarter, our second best Q1 ever. The renewables business is an important part of our growth strategy. And we continue to make progress toward lowering the carbon intensity of our ethanol. This includes enhancements at our production facilities as well as supportive farmer programs that should position us to acquire lower carbon corn as a feedstock in the future.

The outlook for this business remains strong. Improving and maintaining our four production facilities for optimal efficiency is crucial to us. After the quarter end, we completed all four maintenance shutdowns and successfully returned to full production. Our renewable diesel feedstock merchandising business is also an important growth engine for the company. And while we increased volume in the quarter, margin compression reduced the year over year result. We believe that with additional renewable diesel refinery demand expected in 2024, values and margins will stabilize.

The nutrient and industrial business outlook also remains positive as we anticipate solid demand for the agfertilizers and specialty liquid that we supply. The spring planting season is critical to this business. And it is typical, we have pockets of our geographies that have experienced wet weather. We're also ready to support our customers with both input supply and application services when needed.

We continue to work on operational improvements in our turf business and recently closed on the acquisition of Reed and Prime, a turf fertilizer manufacturer located in New Jersey, that expands our geographic reach to the East Coast. So with our strong balance sheet position and a desire for growth, we're excited about significant opportunities in each of our three segments. We have a number of organic growth initiatives as well as a pipeline that is very robust.

With changes in the ag markets, we're also focusing on organic and acquisition opportunities that should help us achieve our 2025 run-rate EBITDA target of $475 million. We'll continue to maintain and maximize our response and our decisions that benefit our customers and maximize shareholder value as we execute on growth opportunities within our stated strategy.

With that, I'll turn things back over to Rocco. And we'll take your questions.

(Operator instructions) Ben Bienvenu, Stephens.

Thanks. Good morning, everybody. I'm more and more defensive about morning. If I think about Pat, kind of all the puts and takes that you laid out in the trade business and the risks from geopolitical uncertainty and maybe the pullback associated with that, more balanced, less volatile backdrop, but now a weak carry in the market for large crop here in the US help us think through net of all of those factors how you're thinking about for the remainder of the year, maybe a year-over-year comparison of kind of trade contribution of pretax earnings to the business?

Sure. Very good question, Ben. I'll get it started and then turn it over to Bill who knows it better than I do. I think the interesting thing and think about us as we talk about the balance of our portfolio. So the good news for us is the carriers coming back to the weak market. As you know, historically, we're very well positioned for storage of soft wheat inventories in our Eastern Assets. And that's going to be a nice income source for us a traditional way of earning carry income at our elevators. But some of the volatility that we had a year ago with really tight inverse markets. We took advantage of that with some of our point-to-point trading desks, not there this year, which has us to do something quite different. So we just haven't had a lot of farmer engagement selling at lower prices or even customers wanting to on the buy side wanted to book ahead for, but that will change as we go through the crop year. I think the pharmacy, what's coming, what's our plan to have a little more confident position. And if we have a little pop like we've seen recently will have better farmer engagement here. We'll just be able to work through these merchandising through the course of the year in a different fashion up.

I'll turn it over to Bill who can elaborate further Corbin.

The only thing I'd add to what our path what Pat had commented there is in Q1, you had a kind of a combination of items, right? You had lower prices and the producers had been used for the end users were being rewarded by waiting. So we just saw a lot fewer transactions occurring now that we're getting into our corn planting. And we've had this recent rally, we're seeing a lot more activity pick up. And as we've talked about before, your end users are currently at least in the US are doing very, very well. So we don't anticipate any changes there. And assuming we end up with the expected fall crops, we actually feel like we're positioned really well. We're going to see less volatility likely in 2024 as we look forward today, which will not benefit our merchandising businesses. But at the same time, we have a lot of capacity that we're able to accumulate on a cheap harvest basis and be able to trade that into the marketplace as the market dictates.

And maybe just add one more thing that I know you know this well, Ben, but it's primarily a domestic supplier. So we're not so much tilted just towards exports. Our big export pull, which we don't have right now. We really focus on those beef, swine, poultry customers as well as ethanol flour, millers of other food and pet food business. So the diversification we've done over the last several years, especially in the food and pet food area, kind of diversifies our portfolio domestically. And we work closely with those customers and expect that to be and nice support for us.

Okay. Very good. And thinking strategically about capital allocation and kind of positioning of the business, you guys have sort of been swimming upstream, I suppose, and accumulating US domestic grain assets, some of the larger competitors of yours have been selling or leaning out of asset exposure. Why does it make sense for you guys to allocate capital to those businesses. How are you doing it differently? And why is it attractive to you in a backdrop where some of your competitors are moving away from that business?

I'll take that, Ben. If you look back over the last five years, in fact, we've actually trimmed our asset portfolio and I've been able to utilize our remaining assets very positively. The other difference that we have versus some of our competitors, as you mentioned, is we believe that we have the connection from the producer all the way through to the end user with our ability to manage logistics, manage risk and be able to be a good supplier to those customers. So we see value in having the assets that we do have in being able to work with the producers. We'll talk later on some of the regenerative ag products that we've been working on the last couple of years. And so we see our fit in that ag supply chain across North America.

Maybe to add onto that, too, Ben, that I'm just to echo what Bill said. We did a modifier portfolio. We sold Champaign, Illinois, two of our biggest assets. And previous to that, we sold assets we had in Tennessee and Iowa. So we had kind of a truck, our footprint a little bit in grain assets saved a lot of the bolt-on acquisitions we've done have been in pet food and investments we made into food-grade corn. So we're kind of working on those parts of the portfolio. Our niches where we can differentiate. And Bill mentioned now we're trying to position ourselves well with regenerative ag and working around our ethanol plants, how it can be a low carbon provider and working with growers on that. So it's kind of a discrete assets are great assets is in our focus. It's really about how do we broaden our portfolio. It gives us higher margins.

Okay. Very good. Very helpful. Thank you. My last question, if I could ask one more just on the ethanol business and you had kind of a feeling of a positive outlook a little bit there. Can you talk about kind of what your expectations are as we enter the summer driving season with respect to where we see and days of inventory export demand and kind of production across the industry?

Thanks. Yes, I will start with that one also, Ben, if you look at Q1 exports up 25%-plus year on year. Um, we believe that calendar 2024 ethanol exports will see an increase over 2023. We expect that to continue. As everyone knows, we did get the waiver passed on E15. So we'll see that continued demand. And we really view our ethanol plants as some of the best in class and are able to continue to manage really strong results through production capabilities, our risk management and kind of more importantly, being able to really target the opportunities that we see towards the end of this year. And so we do feel pretty positive on the renewables section. Pat hit on our renewable diesel feedstock business continues to grow and volume. Our customers there have seen moderate margin compression due to the slow uptake or ability for some of the RD plants to come online and run at full capacity. But we continue to see our value in that part of the supply chain continue to bring us growth in volume and maybe over the long run, I think a bigger chain and Bill can comment more on this.

We were like what we saw out of the government last week as far as regenerative ag and the outlook for programs for the first half down the road where our big focus for us and position our ethanol plants to be low CI. big scale, high volume quality assets can be important assets to supply the sustainable aviation fuel market. And maybe, Bill, you want to add more to the yes, we have been working aggressively the last 18 months and longer in a couple of situations in making sure that we have a pathway to achieve 45 Z. We have good geological footprint in the East. We have obviously the pipeline runs very close to our Dennis and I will plant. So we feel like we have a pathway for all of our ethanol plants. Some are closer than others to being executed, but we're choosing very selectively the pace that we want to move at and the plants, the plants excuse me, that will bring us the most value the quickest and we do feel like we have have some good opportunities there.

Okay, great. Thanks so much.

Thank you.

Ben Klieve, Lake Street Capital Markets.

Thanks for taking my questions. I would like to continue the conversation a little bit here with the ethanol, the jet opportunity on. It's interesting that there's there's a lot of different takes on this opportunity. It seems very wide-ranging. And I'm curious, you talked about your kind of enthusiasm for the news out of the administration last week regarding kind of regenerative ag practices supporting the ethanol, the jet opportunity on. I've also heard a lot of thought that this isn't really going to be practically implementable on for some time. Do you really get the sense that your farmers within the footprint of your existing ethanol facilities are going to be implementing all the various initiatives that are encouraged over the next few years? Or is that something that they're pretty kind of indifferent or on just not going to participate?

Well, I think all producers will be focused on what they can do to enhance their profitability. The negative comments that you have likely heard from the administrations of 40 b. are primarily related around bundling, which means you have to use all three practices of and that we hope will be unbundled in the 45 c. And geographically, whether you talk about the enhanced efficiency fertilizer cover crop for no-till are going to be different in each of our geographies on which one of the three the producers can use, but where they're able to making the assumption that they are unbundled, where they're able to apply those three optionality. I believe that they are going to utilize them, and they're also going to be able to continue to look at other practices in risk management that we've been pretty good at providing over the last several years or so. In general, bundling is going to be a challenge. If it's not decoupled in the 40, very busy, but our belief today is that it likely will be.

And maybe, Ben, this is fair. It seems like it's the first I go here right. So for the first time, carbon modeling schemes have been recognized by the administration and farming technologies to reduce CI. is part of the program. So it's good to have that out there in writing and the use of the Greek model. Again, there's several of those. But having the degree model used for federal tax policy, it's the first time we've seen that we feel that's a good step, right. And industry associations and grower associations will be working with the government on trying to get the next bill to go around this to maybe be more friendly to applications at the grower level?

I think the simple strategy for a company like the Andersons, we really like our three Eastern plants, how they're positioned and we like the geology that they have to do potential for CCUS at our sites, and we want to take advantage of that. So those we have the biggest most efficient modern ethanol plants with low CI scores will be the winners, and that's our focus. And so this isn't an overnight thing that also is going to producing ethanol just tomorrow. It can be a journey and you got to take the steps one at a time to be positioned for success, and that's where we're positioning ourselves.

Got it. Very helpful. And Pat, you touched on kind of my follow-up question is around the carbon sequestration on your three Eastern plants. Do you have any material CapEx included in that 150 to 175 million number associated with what that what that type of initiative?

Yes. So we mentioned before and Brian can chime in here. So we said about 50/50 of our capital expenditures would be on base spending versus M&A, and we project that to be the same. That includes some plans for CCUS or ethanol plants.

Yes, I would say. And I think some of that will be I could see it being this year and then certainly going into 25 and even beyond.

And that's part of the point these things don't happen overnight, right? Is involved in permitting and working with neighbors and then you got to buy the equipment and you've got to get it installed. So we're working through that process with some really good advisers, and we'll be confident to be able to announce something when we have a really firm plans in place.

It now makes out that nothing is easy, and we'll look forward to updating you in coming quarters on on all those initiatives.

On Turning to the quarter of one kind of very specific question in the trade group. I'm wondering if you can isolate the impact of the international business on that you are that you backed away from for deal of geopolitical purposes. Can you just kind of talk about maybe the magnitude of the EBITDA contributions for that business last year and kind of the outlook for re-entering that those markets here and the later part of this year?

Yes, I'll take that one. The I the change year on year is somewhere in that five to $10 million EBITDA range. And our focus is on making sure that there is ample US dollar liquidity in the markets that we're supplying. And so we feel like it's in the best interest of the company and the shareholders to wait until some of that liquidity comes back before pursuing more opportunities we have ongoing business. The business is operating well today. We're just being very focused on the risks that we're willing to take.

Maybe I can add to that, Ben, I think it's about just a shift of focus within geographies, right? So our Amazon office has been very successful. How we set up operations in Romania that have done very well for us from an origin standpoint, just with the challenges in the Black Sea and Red Sea, we kind of want to go slow as you know, last year we mentioned we had some currency struggles with Egypt, so we want to get that back under control. So we rather just be very prudent with our approach to risk there. But we still think that is an opportunity for growth, especially long term growth for us, but it's not that that makes sense aren't very good.

And then lastly, I'm curious if you can elaborate a bit on your outlook here for kind of first half result of the M&I segment last year and others have kind of a big seasonality shift from Q1 into Q2. Can you kind of frame the kind of first half expectations for that segment from last year to this year?

Yes, I could do that. Certainly, I think you guys you said right now is kind of peak season for that business. Second quarter is really tends to be the strongest quarter for our for our nutrient industrial business. And so when we look at the entire first half year over year, I would probably expect it to be flat year over year to maybe down slightly. I think as we speak, we're probably seeing a little bit lower volumes, but higher margins year on year.

Very good stuff. That's helpful. I appreciate you all taking my questions. I'll get back in queue.

Thank you.

Scott Fortune, Roth MKM.

Thank you and thanks for taking the questions. I just want to follow up a little bit on the nutrient side, we've covered obviously the renewables, but just kind of the kind of investments or CapEx that you're looking at Nutrien industrial side. And are you looking to kind of continue to expand the pet food needs you've built out nicely from that standpoint?

Yes, again, Scott, welcome to the call. Thank you for being on with us today. Yes, we mentioned, we added a small bolt-on acquisition in our turf business on the East Coast, really prime in New Jersey. That's a geography in the East Coast and Mid-Atlantic. We hadn't addressed before. So that's a nice geographic move for us. We'll look at those opportunities. It's really geography by geography. And I think the overall market of M&A, and I can't speak to all industries, but it feels like things are a little bit better. We're seeing more things pop up coming from bankers and in the in the pipeline in general, I don't know if that's a higher interest rate environment or whatever. But I think there's going to be some opportunities for us. Deploy capital wisely will want those to be within our strategies and fit right within our core business. One of those places we mentioned was pet food and specialty food ingredients that we've been able to grow the last couple of years. Again, those have been more small to midsize bolt-on acquisitions and those tend to work well for us. We've been doing some additions of technology and equipment in our plants to support customers that that's a real plus as well as investments we're making in carbon sequestration, we talked about enough and also there's a good opportunity for growth that fits within our strategy.

Yes, Scott, this is Brian. Just to clarify a little bit. I know you had asked specifically about Nutrien is industrial of that business. If I think about our growth capital, that business will probably we'll probably allocate, call it 10 to $15 million of growth capital to that segment this year on Pat mentioned, a lot of those projects get into automation and improvements in our plant, things that maybe didn't pencil a few years ago that now do make good sense.

And just to clarify one further, the pet food ingredient business is also a place that we're allocating capital that actually rolls up under our trade segment. And we have done a couple of acquisitions in that space with a CJ. and bridge over the past it 12 to 18 months. So just wanted to clarify that as well.

Got it. That's helpful. And you kind of a follow-up to that kind of puts you committed to achieving your long-term target here for $25.25 and the bridge is coming from internal investments and expansion kind of M&A. Sounds like how you're seeing kind of the M&A side potentially improving in this current environment, but just kind of step us through bridging to get there. And you mentioned Ally initiatives, but just kind of the priorities of those initiatives?

Yes, I can. I can take a first shot at this, and certainly Pat and Bill can chime in on and we've talked previously on your right to achieve that $475 million EBITDA run rate target by the end of '25 certainly will require M&A. We've said previously that we expected to be about 50/50 on. We are seeing a lot of a lot more M&A activity in our pipeline. And so we're continuing to evaluate those closely. I would say the good news is they do spread across all of the segments that are close to our core. And so there's been there's been good activity and hopefully, valuations will come in line so that we're able to achieve the right return expectations?

I would say on the whole, probably a little bit larger portion allocated to renewables followed by trade followed by fertilizer is how I would kind of think of framing up the big picture there. So I don't know, Pat, if there's anything you wanted to add to that, that makes sense.

And like we said, Scott, that we can't achieve that number by organic alone will need to do some. And we've passed on several deals or last three years. It is we're a little too pricey. I think maybe that will change somewhat in this environment. We have a strong balance sheet, and so we're well well positioned to move on that. And so especially ones that fit in our core competency that we can integrate maybe capture synergies. So those are the areas we're focused on.

Great. And just one last kind of big picture. I'm kind of talking about the ag cycle. I know you've mentioned in the past that we've seen commodity prices come off a little bit of tick-up here, but and farmers' income overall still very solid. But are you seeing any additional pressure here on your obviously from on the ag cycle or you can remain well positioned in the eastern plants and obviously growing the renewable side and you remain well positioned. And that if I just kind of your picture of kind of the ag cycle where we're at right now as we've gotten a couple of years?

So I'm going to start and Bill can chime in here. We know you said like we're off the peak of the start of the Ukraine or when commodity prices really spiked. We set a big production response in South America with a good crop conditions a couple of years in a row here in the US. So this is a normal cycle kind of boom after having some peak pricing. I think it's a good thing for our ethanol business that initially you start to have the pressure on feed values. As corn prices come down, it feels like we've hit a bottom and we've kind of picked up here a little bit recently. I think the demand domestic domestically across all of our industries is quite attractive. So that it's just really exports that are really the slowest segment. And our goal, as Bill talked about earlier is it looks to be really strong this year. So we're pretty positive about that. So in general, this is not a crash of a big market spike. It feels like a return to kind of the normal and growers, as you mentioned, a lot of the peak income they had two years ago. They still are very solid financially. So we're in a kind of good position in U.S. ag in general.

Yes, the only thing I would add to that is the ag cycle is going to be tied a lot more to the global ag markets, supply and demand. And so we still have very strong great corn and bean carryout fleets a little tighter, but we've been able to understand that over the last two or three cycles how that's going to work. But I did think that the one opportunity here for the producers, it is going to be tied to their ability to generate incremental farm income from whichever programs they choose to participate in. And I think that will help soften the landing over the next 12 to 18 months.

Terrific. Appreciate the detail. Thanks.

Thank you.

This concludes the question and answer session. I would like to turn the conference back over to Mike Hoelter for closing remarks.

Thanks, Rocco. We want to thank you all for joining us this morning. Our next earnings conference call scheduled for Wednesday, August 7, 2024 at 11:00 AM Eastern Time when we will review our second-quarter results. As always, thank you for your interest in The Andersons, and we look forward to speaking with you again soon.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.